So the US S&P 500 has dropped from its high of 2872 on 26 Jan 2018 to 2581 on 8 Feb 2018; a 10.1% drop in a matter of days.
While the STI Index has dropped from its high of 3609 on 24 Jan 2018 to 3377 on 9 Feb 2018; a 6.4% drop in a matter of days.
By now, you ought to know that I am not talking about the RED packets/Ang Baos commonly associated with the Chinese New Year. This post is about the red losses in your stock portfolio.
Well, for some, it meant painful losses, while for others, it is an exciting period to buy the dips. Then there are some who are just looking deeper for more opportunities (perhaps not now but later).
Basically, you are not the only one seeing red in your stock portfolio. Many others do as well.
For me, I’m not out of the markets (don’t think I ever will be totally out in the next foreseeable future). My portfolio has also taken a hit. However, I am curious as to what others think as well. So I started surfing and reading what others have to say. Bloggers being bloggers – they love to write.
Well, at least that is better than staring at the losses and crying … :p Just kidding.
Below are the opinions of 10 Financial Bloggers.
1) T.U.B Investing
In his post, titled “Steps To Take In A Market Correction”, he mentioned the following:
- Keep Calm and A Clear Mind
- Reduce Your Watchlist and Focus on Your Portfolio
- Focus on Individual Company and Not The Market
- Pace Yourself, Funds Are Limited
- Buy Strong Fundamental Companies
2) DARRENOCL’S FINANCE BLOG
In his post, titled “Buy? Hold? Sell?”, Darren mentioned that his personal take is to buy the dip. He has entered an order for UMS holdings on 7 Feb 2018, when prices declined.
3) Ryan Goh: Life through these eyes
In his post, titled “What’s your plan when the markets drop?”, Ryan emphasized the need to have a plan to get through the fall in the markets. The plan would be something like this:
- Split the money you have to invest** into 10 portions.
- When the market goes down 10%, invest 1 portion into whatever’s on your watchlist. To keep things simple, I’ll assume it’s the STI ETF.***
- If it goes down another 10% (relative the peak), invest 2 portions.
- If it goes down another 10% (relative to the peak), invest 3 portions.
- If it goes down another 10% (relative to the peak), invest 4 portions. By this time, that sum of money you had will be fully invested.
In his post, titled “STI- [Crash Or Correction?]”, Kelwin & Roy mentioned that they would take this opportunity to look for good blue chips that have been sold down. It’s the great stock sale!
5) Investment Moats
In his post, titled “Stock Markets are Red – Where are the Low Correlations for the Day?”, Kyith mentioned that for himself, he has set up his portfolio based on his financial security needs. He is near the end of his capital injection cycle.
The allocation is based on the overall market value and the individual selections contain a lot of pseudo-bonds that usually don’t do too well in times like this. He has some speculative positions that are going to be killed. However, he has a rough idea what he should do with them.
And for people who are in the phase where they are growing their money. Kyith highlighted that they should rejoice, as drawdowns like this are good for them. It is good because they experience first hand what they have been telling themselves – that they can stomach the volatility.
6) The Bedokian Portfolio
In his post, titled “Seeing Red?”, he mentioned that,
“As investors, particularly the Bedokian Portfolio ones, we must be prepared. Again, if you are in the passive side, just wait for your next rebalancing cycle and reallocate accordingly, and move on. If you are in the active side, there are a few strategies to adhere to, like the 10-30 Rule1, look out for bargains in fundamentally strong equity/REIT counters that fall for no reason, or consider other asset classes.
Remember, investing is a long journey that goes uphill and down.”
7) Financial Samurai
In his post, titled “Contingency Plans For A Digital Bank Run”, Sam mentioned that,
“When the S&P 500 futures were pointing to another -5% opening on February 6, 2018, I got excited. After all, the S&P 500 closed down 4.5% on February 5. I get aggressive whenever the stock market corrects by 10% or more because history has shown positive returns in subsequent days and months.
The initial down 5% move was blamed on the 10-year bond yield jumping to 2.85%. But since the 10-year bond yield declined from 2.85% to 2.75% after the 5% stock market drop, and futures were signaling another 5% drop in the stock market, I figured it was time to deploy some significant cash. Fundamentally, corporate earnings growth and economic indicators were still sound.
Armed with $200,000, my plan was to use $100,000 to buy the morning gap down and deploy the remaining $100,000 throughout the day just in case the stock market panicked even further. I set my alarm clock for 6:15am just in case, brushed my teeth, sat on the toilet, and fired up my Fidelity account to put in my $100,000 buy order.”
8) A Wealth of Common Sense
In his post, titled “The Drawbacks of Behavioral Finance During a Market Correction”, Ben mentioned that he is not sure if this correction will prove to be short-lived or turn into a longer, drawn-out bear market. No one can predict how investors will react once things start to go down. But if you don’t have a plan of attack in place going into something like this, your emotions will get the best of you.
9) Mr. Tako Escapes
In his post, titled “January 2018 Dividend Income And Expenses”, Mr. Tako mentioned that he has changed absolutely nothing in their portfolio and let their investments ride.
He just couldn’t force himself to buy stocks at these elevated prices, so he wrote about investing instead.
Investing is one of the few activities in the world where sloth can actually be an advantage. Moving funds around means fees get generated, and capital gains get taxed. Doing nothing can certainly have advantages.
Well, he did NOTHING in January and saw a 10% gain in their portfolio value. The markets were very optimistic and stocks rose accordingly in January. This didn’t make buying new shares easy.
To quote: “Thankfully, most of these gains disappeared in the single largest one day drop in the history of the Dow.
Just like a sale on eggs at the grocery store, I’m going to be on the lookout for good sales on stocks. After all, what true investors want is lower prices, not higher prices.”
10) The Reformed Broker
In his post, titled “The Definition”, Joshua mentioned the following:
“As for investors who are currently in retirement and drawing on their investment accounts to meet living expenses – provided they have planned well and allocated according to these plans, a 10% normal drawdown in stocks should not have any material impact beyond the merely psychological.
And for those who’ve been hurt disproportionately due to excessive risk-taking, leverage or poorly constructed portfolios, it serves as a perfect wake-up call that they may need to consult a professional on either their plan, their portfolio or, most likely, both.”
For many of the bloggers, they are sanguine about the correction. They have highlighted the need to have a plan, and not let your emotions get the better of you. For those who have speculated recklessly, they should use this as a lesson. For others who have planned well, this could be a great opportunity to buy quality stocks at a lower price.
Many of them have started strategizing on how to deploy their cash in buying the dips. Take, for instance, the bloggers from:
- T.U.B Investing,
- DARRENOCL’S FINANCE BLOG,
- Financial Samurai,
- Mr. Tako Escapes.
Some are in fact excited (Financial Samurai) and even thankful for the correction (Mr. Tako Escapes).
Well, some may think that Financial Bloggers are an odd bunch…
However, we all do not know how long (and how deep) the draw-down will be.
“It would be wonderful if we could avoid the setbacks with timely exits, but nobody has figured out how to predict them.” Peter Lynch
Actually personally for me, I think things are starting to get interesting. Although, I don’t see many undervalued quality stocks yet (given the long run-up we had so far). It has been a long while since I started thinking about buying stocks for keeps.
I can’t do much about the losses that are already in my portfolio, but for now, I can do much to plan for the foreseeable future. I think the fundamentals of many of my stocks can withstand economic setbacks.
I will never ever have a crystal ball (to tell me when the markets will crash) and I will always have a foot in the markets. I also don’t short stocks. So when the markets turn, my portfolio will be hit.
Stock investing is always about the future, not the now. And the distant future is starting to look better (can’t say the same for the immediate future).
Shall leave you with this song.
Now that I have completed this post, it’s back to staring at my stock portfolio…. :p